NY Fed Sees Consumer Expectations Slide On COVID-19

A March survey of consumer expectations by the Federal Reserve Bank of New York released Monday (April 6) found mounting worries over job losses, debt and spending as the coronavirus continues to wreak havoc on the U.S. economy. 

“The March survey, which was fielded between March 2 and 31, records a substantial deterioration in financial and economic expectations,” said the authors of the survey, “including sharp declines in household income and spending growth expectations.”

According to the data, the number of consumers who said losing their jobs seemed a “probability” was 18.5 percent, which the Fed post said was a record reading since the survey debuted in 2013.

And a majority of those queried said that they expected unemployment, as a whole, to increase through the next year.

In terms of overall expectations, 27.8 percent said they were expecting to be worse off (and 31.2 percent expecting to be better off) in March. That’s a marked deterioration from the respective 10.5 percent and 42.9 percent recorded by the New York Fed in February. Respondents were less sanguine about finding a job to replace the ones lost — where the “average perceived probability” of finding a new job in the event of a job loss today, sank to 53 percent from 58.7 percent.  

Looking forward at household spending growth expectations for one year ahead, the February reading was 3.10, versus 1.14 in March. And in the latest survey taken by the Fed in the last week of March, the expectations were revised sharply downward to 66 basis points.

“We find greater concern about future access to credit and an increase in the average likelihood of missing a debt payment over the next three months,” said the New York Fed. The mean probability of not being able to make minimum debt payments three months from now rose from 11.3 percent to 15 percent.

The readings show gradually worsening expectations through the month as the coronavirus took hold, as the increasing shuttering of millions of U.S. businesses led to a surge of unemployment claims across the country.

And the slide in consumer sentiment, and anticipation of spending more money in the future, dovetails with the continuing PYMNTS’ “field studies” of more than 2,000 consumers living in the connected economy. 

As noted by Karen Webster, the latest reading (and third consumer study) showed that where spending is in place, consumer demand has shifted online, as digital commerce remains one of the only conduits where consumers can get the supplies needed for daily life.

The respondents queried by PYMNTS showed the percentage of consumers shopping online for groceries tripled from 3 percent at the beginning of the month to 9 percent as recently as March 28.  

And the percentage of consumers shopping online for items that were not grocery related came in at 30 percent at the end of the month, up from 13 percent at the beginning of March. As many as 87 percent said they are shopping less for groceries, and 80 percent are shopping less for things that are not groceries.

Over the last 22 days stretching across three separate surveys, PYMNTS found, 15 percent of consumers said they no longer had a job. And 28 percent said they were “extremely concerned” about job loss.  

The pullback in spending is illuminated in part by the fact that 58 percent of respondents said they have half as much in savings as they will need in order to meet expenses if savings are their only source of cash. As many as 55 percent of Americans have two weeks or less of cash available to pay bills before having to draw down on savings.

For millions of individuals and families, the belts are tightening one notch at a time, while the ripple effects of a pullback in consumer spending will continue to chip away at revenue streams already decimated by COVID-19.